Insurance; Whether
Insurance Broker Violated CUIPA in Failing to Disclose to its Clients an
Agreement to Steer Clients to Certain Insurers in Exchange for Commission
Payments. The state brought this action against the defendant insurance
broker, alleging that the defendant entered into a program, known as the Millennium
Partnership Program (MPP), with selected insurers, whereby it would secretly
steer clients to those insurers in return for commission payments. The state asserted
that the defendant's clients mistakenly believed that the defendant was
recommending insurance products that offered the best coverage for the best
price when the defendant was actually recommending products with the aim of
maximizing its commissions under the MPP. The state claimed that the defendant
violated the Connecticut Unfair Trade Practices Act (CUTPA) and its fiduciary
duty of loyalty and fair dealing to its clients. The trial court ruled for the
state on both claims. The court noted that the defendant sells insurance through
its wholly owned subsidiaries and their respective producers and that the
majority of producers had never heard of the MPP. It then determined that
although the state had not proved that the producers acted improperly, it had
proved that the defendant breached its fiduciary duty to its clients in failing
to disclose the MPP. In rejecting the defendant's claim that the producers'
relationships with their clients could not be attributed to it and that it had
no fiduciary duty to the clients, the court held that the defendant could not
hide behind its corporate form after directing its subsidiaries to carry out
its unfair and deceptive business practices. It also found no merit in the defendant's
argument that the state could not prevail on the CUTPA claim because it had failed
to prove that the conduct violated the Connecticut Unfair Insurance Practices
Act (CUIPA). The court agreed that for insurance-related conduct to constitute
a violation of CUTPA, the conduct must also constitute a violation of CUIPA.
It found, however, that CUIPA had been violated here because the defendant's
nondisclosure of the MPP was "deceptive or misleading" under CUIPA. Moreover,
it ruled that the state's action was not barred by the "filed rate"
doctrine, which precludes actions that question the amount of premiums charged
to consumers if the rates are filed with appropriate regulatory authorities,
which, in this case, would be the department of insurance. It determined that
the state was not questioning the reasonableness of any premium but was seeking
to compel the disclosure of the MPP. By way of relief, it ordered the
defendant to account for all commissions earned under the MPP for its
Connecticut clients so that it could determine how much of the defendant's
revenues were derived from conduct that violated CUTPA. In this appeal, the
defendant argues that the trial court improperly found that it violated CUIPA
and improperly engrafted a fiduciary duty of disclosure into CUIPA. It also
argues that the court improperly found that it had a fiduciary duty to disclose
the MPP to its subsidiaries' clients and improperly ordered relief for damages
that are barred by the filed rate doctrine.